Lawmakers coming to Santa Fe next month for the 2018 legislative session received good news Wednesday with a report showing continuing economic strength in New Mexico. One key legislator says some of the new revenue should be used to give state employees a pay raise.
For the first four months of the 2018 fiscal year — July through October — state tax receipts were up by $292 million, or 16.6 percent, from a year ago, according to the general fund tracking report released by the Legislative Finance Committee.
The expansion is broader than numbers presented just three weeks ago as part of a formal forecast being used to set spending levels for fiscal year 2019, which begins July 1. That estimate indicated Gov. Susana Martinez and lawmakers would have some $200 million to beef up cash reserves or spend on new programs, salary hikes and services.
The new projection indicates there may be another $82 million of unspent cash available by June 30.
"The growth significantly exceeds the consensus revenue forecast of a 3.8 percent increase in revenue for the full fiscal year," economists with the Legislative Finance Committee wrote in the general fund tracking report.
State Sen. John Arthur Smith, D-Deming, chairman of the Senate Finance Committee, said the new numbers give him more confidence that there will be a sufficient cushion in the $6.1 billion general fund to pay for a cost-of-living increase across state government.
The legislative budget will be released Jan. 5, he said.
The priority, Smith said, is for salary adjustments for Corrections Department officers, who staff state prisons and are working overtime because of worker shortages. Higher starting pay would help reduce overtime hours and improve recruitment efforts in prisons, he said.
But Smith said he believes there is enough of a cash cushion for an across-the-board pay increase for state employees, including teachers, of about 1.5 percent, though that number is still being negotiated.
"I see 1.5 percent as a very reasonable number out there," he said. "I will be watching in the Senate to see if we can get bipartisan support for that."
The Legislative Finance Committee also will work to boost dollars going into early childhood programs, public education and nursing homes, Smith added.
Tax revenues coming into the state general fund, the main pot of money that pays for everything from public education to courts, dropped for two consecutive years as the price of oil fell from over $100 to under $30 a barrel. That not only cut production levels but led to layoffs and less consumer spending throughout the state -- especially in the Four Corners region and southeastern part of the state, which heavily rely on energy production.
The depletion of reserves, from more than $700 million to zero, was one reason Moody's Investors Services cut the bond rating for New Mexico's capital projects, which has meant slightly higher borrowing costs. Both Martinez and lawmakers say they want to bring reserves back to about 10 percent of the general fund — at least $600 million.
With the price for a barrel of crude oil now at $59, production levels are at record highs in the state, meaning more drilling and hiring.
The money flowing into the general fund from mining, quarrying, and production of oil and gas was up 94 percent the first four months of the fiscal year. Likewise, gross receipts tax income for construction was up 16 percent in those four months and up 30 percent for transportation and warehousing — a category closely aligned with the energy sector.
While gross receipts tax revenues are up 3.4 percent in Bernalillo County, and 4.7 percent in Santa Fe County, the oil-patch areas of Eddy and Lea counties have posted far larger increases of 50 percent and 40 percent.
An economics index updated Wednesday by the Federal Reserve Bank of Philadelphia shows that New Mexico is one of 20 states where the economy has expanded by more than 1 percent over the past three months.
"It's great to have it. That's a much better situation than we've had in the past," Smith said, referring to two recent special sessions in which lawmakers had to cut spending to avoid unconstitutional deficits.
"I still want to be careful," Smith said. "I want some stability from the roller-coaster ride we've had. It's either feast or famine."
Contact Bruce Krasnow at firstname.lastname@example.org.